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Mexico Economy Slips in Q2

Mexico Economy Slips in Q2Mexico Economy Slips in Q2

Mexico’s economy shrank around 0.1% in seasonally adjusted terms during the second quarter from the previous three-month period, according to a preliminary estimate published by the national statistics agency on Tuesday.

Compared to the same quarter a year earlier, the economy grew by 2.7% in unadjusted terms, the agency said, Reuters reported.

The decrease, which translates into a seasonally adjusted annualized drop of 0.3%, followed a 1.1% expansion in the first quarter that was equivalent to 4.6% annualized growth.

Industrial production in the April-June quarter fell 0.3%, services grew 0.3%, and agricultural production was down 2.1%, according to the preliminary reading. Revised second-quarter GDP data are due on Aug. 24.

After a strong start to the year, private investment will probably be negative in the second quarter, said independent economist Jonathan Heath, noting uncertainty that emerged during the quarter over negotiations with the US and Canada to redraw the North American Free Trade Agreement.

The Mexican peso depreciated on jitters over the future of Nafta and the outcome of the July 1 presidential election won by leftist candidate Andres Manuel Lopez Obrador. The currency recovered after Lopez Obrador, who is scheduled to take office Dec. 1, reaffirmed his commitment to the trade negotiations, fiscal restraint, and central bank autonomy.

GDP grew 2.7% from second quarter of 2017, helped by the shift this year in the Easter holiday week to March from April, which meant the second quarter had more working days than the year before. That brought growth for the first half of the year to 2%.

“GDP growth is expected to tick up in the second half of the year as political uncertainty fades and inflationary pressures continue to moderate,” forecasting firm FocusEconomics said in a report in which it estimated full-year growth of 2.3%.

The International Monetary Fund last week kept its 2.3% growth estimate for Mexico in 2018, but lowered its forecast for 2019 to 2.7% from 3% “to reflect the impact of the prolonged trade-related uncertainty on investment and, to a lesser extent, private consumption.”

The economy also faces effects in 2019 of the change of administration. “You always, always have a slowdown in the first year of each administration, and this time it’s going to be probably even more difficult because of a lot of things that Lopez Obrador wants to change,” said Heath.

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